2004 (7) TMI 653 - AT - Income Tax

Reassessment proceedings under section 147 initiated on the basis of survey - Addition u/s 68 as income from undisclosed sources on account of unexplained cash credit - HELD THAT - In the instant case the addition has been made on the basis of statement of V.D. Trivedi recorded during survey but no opportunity of cross-examining him having been allowed to the assessee the said statement cannot be relied upon and in turn cannot be made basis of addition. The onus of proving sale of diamond does lie on assessee no doubt but the assessee having depended upon Assessing Officer for effecting the presence of V.D. Trivedi for cross-examination and the Assessing Officer also having issued summons to V.D. Trivedi it cannot thereafter be pleaded by the department that the assessee failed to produce V.D. Trivedi for proving sale of diamond by assessee to V.D. Trivedi. The summons having been returned unserved by the postal authorities with the remark Not claimed it was for Assessing Officer to have exercised his powers for enforcing the attendance of V.D. Trivedi for verification of sale when the Assessing Officer was doubting the same; V.D. Trivedi was assessee and survey action in the case of V.D. Trivedi had undisputedly taken place. Thus there is hardly any justification in law for putting the blame of non-production of V.D. Trivedi on assessee and attributing the failure of discharge of onus to assessee the vast jurisdiction for enforcing attendance of any person has been vested with the Assessing Officer under law not without a purpose and the same is meant to be exercised so as to explore the truth by dissecting the layer-spread of haziness on true facts. An appropriate action strict though it might have been having not been taken by Assessing Officer may be due to being too busy to spare time for taking such strict action in accordance with law as required in the above mentioned frustrating circumstances the department cannot justifiably find an escape suited to it for making addition in the hands of assessee with the emphatic thrust of reasoning that the assessee has failed to produce V.D. Trivedi. Be that as it may considering all the facts and circumstances of the case as also the legal position I am of the considered view that in the circumstances of the case this addition is uncalled for. I therefore delete the addition. In the result this appeal of assessee is allowed.

Summary

Issues involved:
The appeal involves a single issue disputing the addition of Rs. 2,17,600 made by the Assessing Officer under section 68 as income from undisclosed sources on account of unexplained cash credit.

Details of the Judgment:

Issue 1 - Addition of Rs. 2,17,600 under section 68:
The assessee contended that the addition was made in reassessment proceedings under section 147 based on a survey in the case of V.D. Trivedi, without allowing the opportunity to cross-examine V.D. Trivedi. The assessee provided evidence including V.D. Trivedi's retracted statement, bills of purchase, and confirmation letter. The Assessing Officer treated the sale of diamonds as fictitious solely based on V.D. Trivedi's statement. The Department argued that the transaction was fictitious based on surrounding circumstances and cited legal precedents. The Tribunal held that while conclusive proof is not required in income tax proceedings, decisions can be made based on preponderance of probabilities. The Tribunal found that the statement of V.D. Trivedi cannot be relied upon without allowing cross-examination, and the onus of proving the sale of diamonds did not lie solely on the assessee.

The Tribunal emphasized that the Assessing Officer failed to enforce the attendance of V.D. Trivedi for cross-examination, despite issuing summons that were returned unserved. The Tribunal concluded that the addition was unjustified due to the failure of the Assessing Officer to take appropriate action to verify the sale. Therefore, the Tribunal deleted the addition of Rs. 2,17,600.

In conclusion, the appeal of the assessee was allowed, and the addition under section 68 was deleted.